Abstract
This paper uses auction theory to explain the unique design of the 1998–2013 posting system agreed to between Major League Baseball and the Japanese Nippon Professional Baseball League that allowed for the transfer of baseball players from Japan to the United States. It has some similarities and many differences from the transfer system used to obtain players in European football. The unique features of the posting system were a compromise between Major League Baseball clubs and Nippon Professional Baseball clubs with the understanding that the former was a collusive group of club owners. Revenue sharing is a method to enforce a system of side payments to collusive bidders. It is then profit-maximizing to have the bidder with the highest net surplus from the player win the auction. Changes to the revenue sharing system used in Major League Baseball reduced the ability of club owners to bid for Japanese players, hence changes to the bidding rules of the posting system coincided at the same time.
Highlights
The transfer system in European football is well known and very lucrative for professional clubs.Large amounts of money changes hands and world quality players move among clubs such as RealMadrid and Manchester City
Little known to Europe and most of North America is the transfer system used in Major League Baseball (MLB) called the posting system
This paper began by describing the posting system used by MLB and the NPL in the 1998–2012 seasons and posed the question why the posting system was designed the way it was
Summary
The transfer system in European football is well known and very lucrative for professional clubs. Large amounts of money changes hands and world quality players move among clubs such as Real. Little known to Europe and most of North America is the transfer system used in Major League Baseball (MLB) called the posting system. The posting system is currently used only for Japanese players wishing to move to North America (curiously, the system does not operate in reverse). The world took notice in November of 2006 when the Boston Red Sox paid a record $51 million for the exclusive rights to negotiate with pitcher Daisuke Matsuzaka of the Seibu Lions club. The rules and characteristics of the European transfer market are quite straightforward to readers of this journal, but the posting system might seem a mystery. This paper uses auction theory to explore why changes were made to the posting system since its inception in 1998 and solidifies the relationship between the posting system and MLB’s revenue sharing system
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